BIP13: BALN Allocation Adjustment

BIP13 proposes to change the BALN reward distribution for stablecoin pools.

This is the current distribution:

  • IUSDC/bnUSD - 1.5%
  • IUSDT/bnUSD - 3%
  • USDS/bnUSD - 0.5%

The is the proposed change:

  • IUSDC/bnUSD - 2.5%
  • IUSDT/bnUSD - 0.5%
  • USDS/bnUSD - 2%

Since the IUSDT/bnUSD pool has been added, it hasn’t generated meaningful revenue. On most days, 24H volume on the IUSDT/bnUSD pool has been less than $1,000. At the same time, the IUSDT/bnUSD pool has more liquidity than the other two pools combined. I think there is minimal interest in the IUSDT/bnUSD pool for multiple reasons:

  • There is no Omm market for IUSDT, which makes holding idle IUSDT for arbitrage traders an opportunity cost. For IUSDC holders, it’s possible to earn yield until an arbitrage opportunity pops up.
  • The conversion process to/from Orbit Bridge has too much friction. IUSDT was originally added to help arbitrage traders reduce the additional conversion from USDT<>USDC on a CEX. However, ETH gas fees (Orbit Bridge) are so unpredictable that it doesn’t make sense for traders to use IUSDT just to save on the CEX trading fee.

Since IUSDT/bnUSD has more liquidity than the other two stablecoin pools combined AND it has minimal usage, I think it’s safe to conclude that IUSDT/bnUSD only has so much liquidity because it has the highest BALN allocation. Thus, I think it makes sense to increase allocation to IUSDC/bnUSD and USDS/bnUSD because those pools generate significant revenue for Balanced, and can use more liquidity (especially USDS/bnUSD).


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